Emerging Stocks Fall as Commodities Push Russia to Bear Market

May 14 (Bloomberg) -- Emerging-market stocks fell as a
plunge in commodities sent Russian and Brazilian equities
tumbling and investors speculated China’s cut in banks’ reserve
ratios won’t be enough to stem the economic slowdown.

The MSCI Emerging Markets Index dropped 2 percent to 952 by
4:31 p.m. in New York, the lowest since Jan. 16. Russia’s
dollar-denominated RTS Index declined, pushing the gauge into a
bear market, while the Micex index fell to a seven-month low.
Brazil’s Bovespa retreated 3.2 percent, the most since Sept. 22.
Brookfield Incorporacoes SA, the nation’s fourth-largest
homebuilder by revenue, was the leading decliner in Brazil and
on the emerging nations’ gauge.

Commodities dropped for a ninth day, extending their
longest losing streak since 2008, as oil slumped to $94.78, the
lowest level in almost five months. The announcement by the
People’s Bank of China on May 12 that it’s cutting the amount of
cash banks must set aside as reserves was deemed insufficient to
support lending and stop an economic slowdown by Lars
Christensen, chief emerging-market analyst at Danske Bank A/S.

“It’s a pretty bad day and the main problem is China,”
Christensen said by phone from Copenhagen today. “China’s
slowing down impacts commodity prices so commodities are now
taking a beating. That’s certainly not good news for some of the
major emerging markets like Russia and Brazil.”

‘Challenging’ Outlook

The MSCI Emerging Markets Index declined for an eighth
straight week on May 11, its longest stretch of weekly losses
since 2008. The index trades at 9.5 times estimated earnings and
has added 3.9 percent this year, compared with the 11.9 multiple
for the MSCI World Index of advanced nations, which has added
3.5 percent in 2012.

Indexes dropped in Poland, Hungary and the Czech Republic
as concerns mounted that Greece will exit the single European
currency. Greece’s political deadlock looked set to continue for
a second week as President Karolos Papoulias failed to secure an
agreement on a unity government.

“The outlook for global emerging markets continues to be
quite challenging, with the deterioration of the backdrop in
Europe,” Benoit Anne, head of emerging-markets strategy at
Societe Generale SA in London, wrote in an e-mail to clients.

Leading Decliners

The RTS Index declined 3.6 percent, reaching the lowest
since Jan. 2. The slide took the gauge down more than 20 percent
from its 2012 closing high reached on March 15.

The Micex Index tumbled 3.5 percent in Russia, declining
for a third day and reaching the lowest since Oct. 6. Federal
Grid Co. dropped 7.2 percent to lead losses after Goldman Sachs
cut the stock to sell from buy on concern it will acquire OAO
MRSK Holding.

Brazil’s Bovespa fell to the lowest level in 2012 as
Brookefield dropped 15 percent, the most since December 2008.
The company reported that net income fell 94 percent on higher
building costs and contract cancellations. PDG Realty SA
Empreendimentos e Participacoes slipped 10 percent and was the
second-biggest decliner.

Petroleo Brasileiro SA, the Brazilian state oil company,
lost 2.4 percent, falling to its lowest level since Oct. 20.

Poland, Hungary

The WIG20 Index slipped 1.9 percent in Poland, which sends
most of its exports to the euro region, while Hungary’s BUX
Index lost 1.8 percent. OTP Bank Nyrt., Hungary’s largest
lender, slid 2.4 percent.

NCsoft Corp., which develops and markets online games and
computer software, fell 12 percent in Seoul, the most since
November 2008, after Blizzard Entertainment announced it would
release video game Diablo III tomorrow.

The BSE India Sensitive Index dropped 0.5 percent after
inflation unexpectedly quickened in April, reducing the central
bank’s scope to extend interest-rate cuts. The gauge’s five days
of declines is its longest run of losses since December.